Succession & inheritance tax planning for foreign owners of German property (2026)

Scope: who Germany taxes and why this matters

This article is current as of 21 September 2026. Germany’s inheritance and gift tax code (Erbschaftsteuer‑ und Schenkungsteuergesetz, ErbStG) draws two different personal tax boundaries. If at the time of death (or gift) the testator/donor or the beneficiary is an “Inländer” (a German tax resident for the relevant rules), Germany imposes unbeschränkte Steuerpflicht — the worldwide estate is within the German tax base. If none of the persons is an Inländer, tax is limited (beschränkte Steuerpflicht) and applies only to assets defined as inländisches Vermögen (German‑situated assets). ([gesetze-im-internet.de](https://www.gesetze-im-internet.de/erbstg_1974/__1.html?utm_source=openai))

What counts as 'German property' (inländisches Vermögen)

For limited tax cases the statute points to the Bewertungsgesetz (BewG) definition of inländisches Vermögen. Land and buildings located in Germany are explicitly inländisches Grundvermögen; other categories include certain domestic corporate shares and ship register entries. In short: a German house, condominium or a direct claim to transfer a German plot is treated as German‑situated and can trigger German inheritance tax even if both parties live abroad. ([gesetze-im-internet.de](https://www.gesetze-im-internet.de/bewg/__121.html?utm_source=openai))

Residency tests and the five‑year rule

Residence for tax purposes follows the Abgabenordnung: a taxable German ‘residence’ requires an available dwelling that the person will keep and use; habitual abode (gewöhnlicher Aufenthalt) follows a factual presence test. These definitions determine whether someone is an Inländer for ErbStG purposes. Special rule: German citizens who have not been abroad for more than five consecutive years may still be treated as Inländer for inheritance tax — i.e. the five‑year tie can extend German taxing power after emigration. If you are a German national who left, or a non‑German with multiple homes, document dates and where you spend time: the tax consequence (worldwide vs limited tax) is binary. ([gesetze-im-internet.de](https://www.gesetze-im-internet.de/ao_1977/BJNR006130976.html?utm_source=openai))

Common traps for foreign owners

1) Vermächtnis vs inheritance: the Bundesfinanzhof has confirmed that mechanics matter — an in‑country property transferred by a foreign will or legacy can produce a different German tax outcome than a direct intestate inheritance or a domestic title transfer. A recent BFH press release highlights that in some fact patterns a foreign legacy of a German property did not create German inheritance tax for a foreign recipient. Don’t assume the same result for gifts or for transfers initiated in Germany. ([bundesfinanzhof.de](https://www.bundesfinanzhof.de/de/presse/pressemeldungen/detail/keine-erbschaftsteuer-bei-erwerb-durch-auslaendisches-vermaechtnis/?utm_source=openai))

2) Claim‑to‑title is taxable: acquiring a right to transfer German land (for example, a contractual claim to ownership) can be treated as inländisches Vermögen and taxed. 3) Reduced or prorated allowances: under beschränkte Steuerpflicht the full personal Freibeträge may be reduced; check § 16 ErbStG for how the statutory allowances apply or are prorated. 4) Double tax risk: Germany’s taxing of German property can overlap with a second country; relief depends on treaties and proof of foreign tax — raise this early with your adviser. ([gesetze-im-internet.de](https://www.gesetze-im-internet.de/bewg/__121.html?utm_source=openai))

Practical checklist — what to ask your Steuerberater

Take these concrete documents and questions to your German tax adviser:

• Exact domicile chronology for decedent/donor and each beneficiary (dates and addresses). Which dates prove or disprove a German wohnsitz/gewöhnlicher Aufenthalt? Cite AO § 8/§ 9. ([gesetze-im-internet.de](https://www.gesetze-im-internet.de/ao_1977/BJNR006130976.html?utm_source=openai))

• Title documents and any contracts creating a claim to transfer (purchase agreement, legacy, testament, escrow instructions). Is the asset in Germany under BewG § 121 and therefore inländisches Vermögen? ([gesetze-im-internet.de](https://www.gesetze-im-internet.de/bewg/__121.html?utm_source=openai))

• Ask whether the transfer is an intestate acquisition, a direct bequest, a Vermächtnis or a lifetime gift — and how the BFH case law might affect treaty relief. ([bundesfinanzhof.de](https://www.bundesfinanzhof.de/de/presse/pressemeldungen/detail/keine-erbschaftsteuer-bei-erwerb-durch-auslaendisches-vermaechtnis/?utm_source=openai))

• Which Freibeträge apply and will they be prorated under beschränkte Steuerpflicht? Request a § 16 ErbStG calculation and an illustration of tax at marginal rates under § 19 ErbStG. ([gesetze-im-internet.de](https://www.gesetze-im-internet.de/erbstg_1974/__16.html?utm_source=openai))

• Check double‑tax treaty relief, procedures to avoid double taxation and documentation your adviser will submit to the Finanzamt (including proof of foreign tax paid). Finally: ask for a written summary of filing obligations and whether the estate needs an Erbschaftsteuererklärung – don’t rely on oral advice only.

Final practical notes

If you own German property from abroad, the default risk is straightforward: German land is a German tax base. The decisive questions are (a) whether any person is an Inländer for ErbStG purposes and (b) the legal form of the transfer. These are fact‑sensitive legal tests — get a German Steuerberater (or a tax lawyer) involved early and bring the documents listed above. This article explains statutory lines and recent court signposts but does not substitute for tailored advice. ([gesetze-im-internet.de](https://www.gesetze-im-internet.de/erbstg_1974/__1.html?utm_source=openai))